According to the Centre for Risk Studies at the Cambridge Judge Business School, the city of Houston, Texas could lose as much as $60 billion of its gross domestic product (GDP) output over the next year, as a result of hurricane Harvey.
Hurricane Harvey flooding in Houston – Photo from ABC News
At $60 billion, the loss of economic output could potentially be higher than the physical damage costs and insurance and reinsurance industry loss estimates for the storm, which is set to be one of the costliest natural disasters on record.
As a result of the extensive and catastrophic flooding in the city of Houston brought by hurricane Harvey, the Centre for Risk Studies applied its models to assess the amount of lost sales, revenues, and economic output that would be lost to regional businesses.
“In addition to loss of human lives and physical destruction of property, the flooding will disrupt the city’s economy, which will in turn influence the region’s economy, with potential consequences for the US economy and internationally.
“The loss of expected output is the likely result of the closure of workplaces, the disruption of the labour force, the loss of power and water supply, the suspension of airport and port traffic, and additional consequential economic effects such as demand shock and post-event inflation,” said Simon Ruffle, Director of Research and Innovation at the Centre for Risk Studies.
Houston’s GDP is estimated at $314 billion in 2016, with almost 1.4% growth so far in 2017. Meaning that prior to the flooding from hurricane Harvey, the city was expected to have a GDP of $316 billion in 2017, according to the Centre for Risk Studies.
The report by the Centre also reveals that flooding is Houston’s top threat for potential economic loss, making up around a quarter of its total GDP at risk.
A statement reveals that the Centre for Risk Studies finds Houston to be a ‘highly’ resilient economy, underlining its ability to harness and attract economic investment to aid recovery post-Harvey. Furthermore, businesses are well equipped and able to repair a lot of the physical damage, with the region being well-governed and “socially cohesive.”
“These factors suggest that the economy is likely to bounce back within a year or two of the catastrophe,” continued Ruffle.
However, the impact to Houston’s economy could increase substantially in the coming days and weeks should the flooding disrupt businesses for long periods of time, if recovery is delayed or slow, or if any follow-on catastrophe events take place, such as oil or chemical explosions or pollution, warned Ruffle.
“The flooding brought much of the economic activity of the city to a halt. Two major airports were closed. ExxonMobil and Royal Dutch Shell shut down their oil refineries in Baytown and Deer Park. The water purification plants of the city are submerged, with water and power loss restricting activities even in areas with no flooding,” explained the Centre for Risk Studies in a statement.
Read all of our Hurricane Harvey coverage here.
